Pound Euro Exchange Rate Wavers following Dire German Data

Pound Euro (GBP/EUR) Exchange Rate Rangebound as Both Currencies Lack Support

The Pound Euro (GBP/EUR) exchange rate fluctuated in a narrow range this morning as both currencies faced headwinds.

At the time of writing, GBP/EUR is trading at €1.1214, virtually unchanged from this morning’s opening level.

Euro (EUR) Muted following Poor German Data

The Euro (EUR) is subdued this morning following some troubling data out of the Eurozone’s largest economy.

German industrial production contracted far more than forecast in December, printing at -3.1% rather than -0.7%. This huge slump in production may mean that Germany is in danger of entering a recession.

Commenting on the results, Carsten Brzeski, an economist at ING, said:

‘The former growth engine of the German economy is stuttering and no improvement is in sight…

‘Today’s industrial production was the last hard data for the month of December. It is a month to forget. Retail sales, exports and imports all fell sharply. Either this data will be strongly revised upwards in the coming months or the German economy entered hibernation in December.

‘Despite the latest optimism reflected in improving sentiment indicators, this economic hibernation is unlikely to end any time soon.’

This gloomy tone has left EUR without much support this morning.

Pound (GBP) Subdued amid Dovish BoE Expectations

Meanwhile, the Pound (GBP) is also under pressure this morning, which is preventing it from gaining against the Euro so far.

The weakness in the Pound comes as investors continue to digest last week’s Bank of England (BoE) interest rate decision. The bank signalled a coming slowdown in policy tightening, with markets now pricing in the possibility of a hold or cut at the next meeting.

Comments from former BoE policymaker Danny Blanchflower may be adding to this pullback in rate rise bets. Blanchflower, who has been a vocal critic of the current Monetary Policy Committee’s (MPC) decisions, warned that a ‘collapsing housing market’ and ‘slowing economy’ will force the BoE to pull a screeching policy U-turn and cut rates rapidly later this year.

As markets continue to rein in their expectations of more interest rate rises from the UK central bank, Sterling remains under pressure.

Pound Euro Exchange Rate Forecast: Central Bank Speakers to Prompt Movement?

Looking ahead, a number of Bank of England and European Central Bank (ECB) policymakers are due to speak today. While none of the speeches are expected to be especially impactful, any comments about future monetary policy could affect the respective currencies.

Other than these speeches, economic data is lacking today. As a result, the common currency may find itself influenced by news from the Russia Ukraine war. If concerns about a coming Russian offensive continue to mount, EUR could face some pressure.

Turning to the Pound, GBP investors may focus on domestic news. Ongoing worries about the British economy could weigh on the Pound.

Samuel Birnie

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